The Blog of International Judicial Assistance | By Ted Folkman of Pierce Bainbridge

Patton Boggs Opens A New Front In The Chevron/Ecuador Case

Posted on February 28, 2012

For the most part, Chevron has been the master of ancillary litigation in its dispute with Ecuador, bringing many § 1782 judicial assistance proceedings, a RICO action, a declaratory judgment action, and of course a claim under the US/Ecuador bilateral investment treaty. The Lago Agrio plaintiffs have fought back in what I consider to be a minor way, with a petition to the Inter-American Commission on Human Rights. But for the most part, while the plaintiffs have been largely successful in the main litigation, Chevron has had plenty of space to make hay with its ancillary claims. But now the plaintiffs have gotten in on the action.

On Feb. 15, the Lago Agrio plaintiffs’ lawyers, Patton Boggs LLP, sued Chevron in the District of New Jersey. The complaint is a fascinating read, because it draws together—from the plaintiffs’ perspective, of course—many of the threads of this complex case. The complaint is admirable, whatever its merits, because it tells a strong story that has a real equitable flavor. Why did Chevron bring so many judicial assistance proceedings in so many courts? According to Patton Boggs, Chevron was hunting for a forum friendly to its claims of fraud in Ecuador. When Judge Kaplan, in September 2010, suggested that the Ecuadoran litigation was “mud-wrestling, not bona fide litigation”, Chevron, according to Patton Boggs, had “found its forum.” It brought it’s RICO case—the case that resulted in the now-vacated preliminary injunction against the plaintiffs—in New York. (Chevron could be somewhat confident that the case would be assigned to Judge Kaplan on the grounds that it was related to the earlier proceeding). Patton Boggs claims that after Judge Kaplan entered a temporary restraining order enjoining the plaintiffs from seeking recognition and enforcement of their Ecuadoran judgment anywhere in the world, he gave the plaintiffs only three days to submit briefs on whether the TRO would be converted to a preliminary injunction, and that he “abruptly closed the record without warning,” depriving them of the opportunity to submit evidence, “including documentation concerning Chevron’s involvement in a scheme to offer a bribe to an Ecuadorian judge.”

Since the injunction was ultimately vacated, what’s the harm? According to Patton Boggs:

The TRO and Preliminary injunction choked off the Afectados’ ability to obtain funding that would allow them to reasonably contend with the upwards of 39 law firms (including 15 of the American Lawyer Magazine’s top 100 firms) that Chevron has admitted in court filings to deploying on this matter—at a cost of untold millions of dollars per month—in jurisdictions throughout the world.

The TRO and Preliminary Injunction incapacitated the Afectados’ lawyers and consultants, including Patton Boggs, directly and indirectly, at a pivotal time in this eighteen-year litigation. The TRO and preliminary injunction forced the Afectados and their counsel to sit on the sidelines and precluded them from taking measures to attach and restrain the movement and disposition of assets, to assure those assets would be available upon enforcement. Meanwhile, Chevron was able to lay the groundwork to resist enforcement in countries where the Afectados were likely to bring the Ecuadorian judgment. The company also sold off otherwise attachable assets in certain of those countries.

Owing to the TRO and Preliminary Injunction, the Afectados now find themselves holding a judgment with inadequate resources to enforce it. Their current and former counsel and consultants, including Patton Boggs, find themselves with unpaid bills. Providers of legal services and advice, like Patton Boggs … wrongfully were enjoined from rendering the very services that they are in the business of providing. Would-be contributors to the Afectados’ cause were deterred by the lack of capital and the threat of a worldwide injunction that would prevent the afectados from ever monetizing the Ecuadorian judgment—and Chevron has admitted that the judgment is the Afectados’ only real asset.

The complaint asserts a claim against the $21.8 million bond Chevron posted as a condition of obtaining the preliminary injunction from Judge Kaplan. It also asserts a claim under New York law, which according to Patton Boggs allows recovery of fees “incurred in resisting, and attempting to have lifted, an unlawful restraint.” Finally, it asserts a claim for malicious prosecution.

There is a lot to digest here. Why Patton Boggs, rather than the Lago Agrio plaintiffs themselves? Perhaps the plaintiffs do not want to do anything to jeopardize their objections to the personal jurisdiction of the US courts over them. Why New Jersey? Certainly New York was out, and the comments from the bench in a Third Circuit argument were not friendly to Chevron. What is the goal? Given that Patton Boggs’s recovery would seem to be limited to its attorney’s fees (fees it spent to vacate the injunction, or fees it would have been paid but for the injunction), which I assume are small in comparison with what is at stake in the case overall, what is the strategic purpose of the action? I am not sure—perhaps it is to obtain discovery into Chevron’s supposed misdeeds in Ecuador?

A prediction, which may or may not be tongue-in-cheek: Chevron will try to have the case transferred to New York.